<\/span><\/h2>\nDoes indexing small-cap value work?<\/strong> The answer, according to bogleheads.org, is a resounding yes. Historical evidence suggests that indexing small-cap value has the potential to produce long-term outperformance compared to other investment strategies.<\/p>\nNumerous academic studies have shown that small-cap value stocks tend to have higher returns than their larger counterparts over the long term. Additionally, these studies indicate that indexing rather than actively managing small-cap value portfolios can lead to better performance due to lower costs and increased diversification.<\/p>\n
The primary reason behind the potential outperformance of small-cap value stocks is the market’s tendency to underprice and overlook these companies, providing an opportunity for value investors. By indexing small-cap value, investors can gain exposure to a diversified portfolio of these underpriced stocks, maximally exploiting their potential for higher returns.<\/p>\n